TOPIC #4
Scaling Capital Projects: Real World Barriers
Can infrastructure projects keep up with growing energy demand, the need to modernize grids, and reliability imperatives?
Utility Capex Is Growing Across Asset Types
Capex growth in the energy industry continues at a double-digit pace.
- Drivers include meeting growing demand with new power generation and storage resources, updating T&D networks, grid hardening, and electrification.
- Estimates coming out of annual report projections issued in 2025 suggest $1 trillion from 2025 to 2029 for a representative sample of U.S. publicly held utilities. EEI recently estimated that its investor-owned electric utility members will invest more than $1.1 trillion in capex in that period.
- The split of capex by asset type for a selected set of gas, electric, and combination utilities is shown in Figure 1.
The challenge of this surge in infrastructure demand lies in the ability of utilities and constructors to secure equipment, materials, and labor and navigate land acquisition and connection processes at the pace that is requested, especially for new data center and manufacturing loads.
It is unclear the degree to which tariffs or elimination of some tax subsidies for wind and solar projects will affect the amount of spending over the next several years.
- Wind and solar projects that “begin construction” within a year of the passage of the One Big Beautiful Bill Act would receive 100% of the tax credits’ value and safe harbor, allowing them to keep full credit eligibility provided the projects enter service within four years. All other projects must be completed by the end of 2027 to qualify for credits.
- There is uncertainty whether this will mean accelerated construction or projects being scrapped or deferred. Acceleration may depend upon the developer or utility’s balance sheet capacity.
- Regardless, gas-fired and nuclear generation will attract investment as baseload technologies that support growing manufacturing and data center development.
FIGURE 1
Capital Investment Trends by Segment for Selected U.S. Electric, Gas, and Combination Utilities ($ Millions) (2025–2029 Forecast)
Notes: *Undesignated reflects totals for companies that do not disclose segmented capex, including Dominion Energy, PG&E Corp., Sempra Energy, Northwest Natural Holding Co., Avista Corp., MDU Resources, and Hawaiian Electric Industries. **Gas includes gas pipelines, storage, distribution, and other gas expenditures. ***Renewables includes planned energy storage spending. Data are for 17 electric utilities, 9 gas utilities, and 21 combination utilities. Capex data for the first three years is the most reliable, as some companies do not consistently release fourth- and fifth-year projections.
Sources: S&P Capital IQ; Regulatory Research Associates; ScottMadden analysis
Key Takeaways
Capital investment in utility infrastructure continues to grow, bolstered by increases in power demand from electrification, manufacturing, and data center development.
The magnitude of investment has utilities, developers, engineers, and contractors managing many large projects at once.
Challenges in labor and equipment availability, as well as slow permitting and interconnection processes, threaten to delay projects as firms find creative alternatives and workarounds.
Potential Overbuild?
With data centers driving a significant amount of energy infrastructure development, there is growing discussion about a potential overbuild of resources, particularly as the “land rush” phase of such development continues.
This is evidenced by the wide bands for potential load growth from data centers. RAND Corporation’s upper band for data center consumption by 2030 is 347 GW, assuming exponential computation growth. Other estimates put demand at around 100 GW by 2030.
As tech companies and data center developers float proposals in multiple locations seeking best pricing and conditions for energy, water, and broadband as well as permitting, more attention is being paid to “phantom data centers” and related phantom load that may not materialize. One observer posits that there are 5 to 10 more interconnection requests than data centers actually being built.
Utilities are addressing this through contractual and up-front financial arrangements. However, absent any contrary indicators, the industry will have to prepare for these loads.
Will Equipment Be Available?
Post-pandemic demand and alteration of supply chains, along with geopolitical shifts and tariff changes, have affected the availability and cost of many critical equipment and materials for power infrastructure.
Equipment backlogs remain problematic across key utility asset categories.
- As shown in Figure 2, combined-cycle gas turbines have backlogs of three or more years from order to delivery and growing.
- Transformer lead times have long been a concern for the power industry. The DOE and the National Infrastructure Advisory Council have been concerned about transformer availability for reliability needs. Large transformers—particularly substation and generator step-up transformers—have two- to four-year lead times.
- Interestingly, with market demand for data center power ASAP, GE Vernova noted that its orders for aeroderivative turbines increased from 1 in 2024 to 27 in the first half of 2025. Aeroderivatives are generally smaller in output than heavy-duty models, fast starting, and fuel flexible but require more maintenance in baseload applications. Wait times have risen to 12 to 18 months.
Beyond availability, costs have increased. As recently as 2017, EIA estimated the overnight installed cost of a combined-cycle unit to be $1,000 to $1,200 per kW. Recent estimates put that range anywhere between $2,000 and $2,800 per kW.
FIGURE 2
Power Infrastructure Equipment: Estimated Lead Times
*For orders placed mid-2025
**Pad-mount
Sources: Natural Gas Week; Power magazine; company investor presentations; Wood Mackenzie; U.S. Dept. of Energy
Alternatives Being Considered
Given backlogs and wait times, utilities and infrastructure developers are employing a variety of approaches to accelerating and guaranteeing access to equipment.
- Aftermarket equipment purchases: After temporarily installing gas turbines at its Memphis data center, xAI reported plans to import a 2 GW combined-cycle power plant from overseas, although it is unclear whether the generation will be behind-the-meter.
- Funded production capacity: Invenergy entered into a supply and manufacturing agreement with Prysmian North America, supporting cost of additional production to deliver 12,500 miles of overhead conductors to support Invenergy’s portfolio of long-distance, high-voltage direct-current projects in the United States.
- Buying operating generation facilities: Citing high installed costs and equipment challenges, several merchant power producers have announced power plant purchases over the past several months. Through mid-July 2025, gas generation portfolio acquisitions have totaled more than 46 GW, including Constellation’s acquisition of Calpine Corp. Talen Energy’s CEO noted that its plant acquisitions cost 50% to 65% (in $/kW) of new build.
Labor Challenges with Strong Data Center and Energy Demand
The construction outlook is mixed with some interest rate or tariff-sensitive sectors.
- Construction industry analysis shows construction spending is down overall since spring 2024 but differs by segment—multifamily residential, commercial (warehouse and retail), and private office construction are down 10%+.
- But demand for data center and power sector construction and necessary tradespeople is expected to remain strong. Figures 3 and 4 show historical power sector construction put in place and top power companies for construction.
- Figure 5 outlines drivers and barriers to energy infrastructure construction.
FIGURE 3
Annual Total Value of U.S. Construction Put in Place – Private and Public Sector Power (2012–May 2025 Annualized) ($ Billions)
Note: Totals reflect individual rounding. *Figures are Value of Construction Put in Place in the United States, Seasonally Adjusted Annual Rate.
Sources: U.S. Census Bureau Construction Spending data; Engineering News-Record, Sage Policy Group (citing Census Bureau); ScottMadden analysis
FIGURE 4
Top 10 Companies with Electric, Gas, and Sanitary Services Construction in Progress (at Year-End 2024) ($ Billions)
Source: Engineering News-Record
Labor Challenges with Strong Data Center and Energy Demand (Cont.)
DOE’s 2024 Employment Report showed 76% of employers across energy technologies had at least “some difficulty in finding qualified workers,” although this was down from 85% in 2022.
- Earlier this year, one industry organization projected that the construction industry will need to attract 439,000 new workers in 2025. Figure 6 shows construction jobs, hiring, and layoff dynamics.
- The removal of tax incentives for wind and solar projects and potential slowdown in some of those projects may allow redeployment of some workers with relevant skills to be redeployed to dispatchable generation or T&D projects.
FIGURE 5
Key Drivers and Barriers to Energy Infrastructure Construction
Sources: Engineering News-Record; Associated General Contractors of America; ScottMadden analysis
FIGURE 6
U.S. Construction Monthly Hires, Layoffs, and Openings (Monthly % Change) (Jan. 2015–May 2025)
Sources: U.S. Bureau of Labor Statistics, Job Openings and Labor Turnover Survey; ScottMadden analysis
Generational Changes: Upskilling Takes Time
Many engineering, procurement, and construction companies dialed back their traditional generation construction businesses as renewable energy and storage projects proliferated and gas-fired generation grew more slowly.
Both utilities and construction contractors are actively engaging potential tradespersons to fill labor shortages. Firms such as Quanta Services are spending millions of dollars on workforce training.
According to the Bureau of Labor Statistics in key utility construction trades such as electricians, about a fifth of employees nationwide are 55 years old or older. Demand for those workers is higher than the overall average job growth of 4% over the next 10 years. However, as shown in Figure 7, it takes years of training for new employees in some of the most in-demand technical specialties.
FIGURE 7
A Shrinking Construction Workforce: Labor Supply Attrition and Replacement
Note: The workforce population above reflects the following craft labor disciplines: Boilermaker, carpenter (scaffold builder), electrician, instrumentation technician, insulator, ironworker (reinforcing), ironworker/welder (structural), lineman, millwright, operator (heavy crane), operator (heavy equipment), pipefitter/combo welder, rigger/signalperson, sheet metal worker.
Source: Construction Industry Resources
Interconnection Remains a Barrier
Gas-fired capacity in queues has ticked up significantly from 2024 to 2025, particularly in the Southeast, Midwest, Mid-Atlantic, and Texas (see Figure 8), up more than 158% nationwide. Wind and hybrid (storage+) projects in interconnection queues are down 25% from a year ago.
With FERC Order 2023 mandated reforms to interconnection queues, more speculative proposals are exiting queues, but this does not appear to have had a material impact on processing timelines (see Figure 9).
- Average duration queue entry to initially anticipated online date remains in line with findings in recent years, hovering around 53 months nationally.
- Across regional lines, it ranges from 44 months in MISO to 69 months in the Southwest Power Pool, or roughly 3.5 to nearly 6 years.
FIGURE 8
Gas-Fired Generation in U.S. Interconnection Queues (2024 vs. 2025) (GW)
Notes: As of June 9, 2025. Calculations based upon stand-alone gas projects; active queues only. PJM active capacity for 2024 updated based on energy/capacity MW.
Source: S&P Global Commodity Insights
FIGURE 9
Average Time from Queue Date to Proposed Online Date (Months)
Notes: As of June 9, 2025. Active queues only. 1Average calculations from queue date to initially proposed online date only. 2Average calculations include available revised online dates. PJM active capacity for 2024 updated based on energy/capacity MW.
Source: S&P Global Commodity Insights
Investigating Behind-the-Meter Options
Given backlogs and wait times, some large customers with strong balance sheets looking to expand or locate in a utility territory are considering self-supply for all or a portion of their energy resource needs.
For example, in early June, Eaton Corporation and Siemens Energy agreed to collaborate on the simultaneous construction of data centers and associated on-site power generation. The “modular and scalable power plant concept” has a standard configuration that generates a scalable 500 MW of electricity, featuring SGT-800 gas turbines, redundancy, and additional battery storage systems. Eaton provides switchgear, uninterruptible power supply, racks, and software.
Similarly, power resource developers are working directly with data center operators and tenants to supply behind-the-meter solutions. Bloom Energy and Oracle Cloud Infrastructure, for example, agreed to deploy Bloom’s fuel cell technology at Oracle’s data centers, purportedly delivering on-site power within 90 days.
Gas companies are delivering one-stop-shop solutions for both power and fuel. Williams Company is supporting the development of two 200 MW data center projects in New Albany, Ohio. Gas-fired generation for Socrates North and South is being constructed by Williams subsidiary Will-Power (for a Meta affiliate) with pipeline connection to the Marcellus shale basin. Williams is investing $1.6 billion in the project.
Advanced Energy, Especially Nuclear, Tests Innovations
For some projects, particularly advanced nuclear development, utilities and infrastructure developers are testing new approaches for efficient and repeatable project execution.
For example, in July 2025, Westinghouse Electric Company and Google Cloud announced a collaboration agreement that will deploy AI tools to support the construction of advanced reactors.
Pairing Westinghouse’s nuclear AI solutions with Google Cloud technologies to perform tasks such as autonomously generated and optimized AP1000 modular construction work packages, the goal is to develop an efficient, repeatable construction process.
With gigawatt-scale units taking six to seven years to construct (not including licensing and siting), EPRI is conducting research across several areas to accelerate advanced reactor deployment, including advanced construction tools, engineering guidance, technical analysis, and seismic qualification of various components, digital tools, and modular fabrication.
EPRI members are also studying advanced manufacturing and mechanized welding to remedy supply chain and labor challenges. Those solutions, however, will require study, testing, and consideration of codes and standards to ensure quality and consistency across the electric industry.
Implications
Utilities will continue to plow capital into their core energy infrastructure business. For some, the volume of activity may outstrip, if only temporarily, their ability to deliver constructed facilities at the pace that some customers are demanding and at the cost they had assumed.
More companies are expanding their thinking, considering long-term, multiproject arrangements, alternatives to new build (such as asset purchases), and self-delivery of some projects or equipment. Investment in training will also be needed to ensure the next generation of infrastructure can be made a reality.
CONTACT OUR EXPERTS
On Scaling Capital Projects
Andy Flores
PARTNER AND ENERGY PRACTICE LEADER
aeflores@scottmadden.com 404.814.0020
Gerardo Morales
PARTNER
gjmorales@scottmadden.com 404.814.0020
Preston Fowler
DIRECTOR
pfowler@scottmadden.com 919.781.4191
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